The Union Budget 2025 presented by Finance Minister Nirmala Sitharaman has drawn mixed reactions from India’s automotive sector. While industry bodies have largely welcomed the budget’s focus on manufacturing, clean mobility, and MSME support, there remains a sense that certain critical sector-specific issues, such as immediate tax relief for electric vehicles (EVs) and incentives for internal combustion engine (ICE) vehicle modernisation, have not been fully addressed.
The budget includes major initiatives such as the National Manufacturing Mission, aimed at strengthening domestic production capabilities, particularly in clean technology manufacturing for EV components. The exemption of customs duty on essential EV materials, including lithium-ion battery scraps and critical minerals like cobalt, lead, and zinc, is expected to bolster India’s EV ecosystem. However, with demand for EVs still constrained by high initial costs and limited charging infrastructure, the industry remains cautious about the pace of transition.
Auto Industry Sees Promise In Clean Mobility Push
The Society of Indian Automobile Manufacturers (SIAM) has praised the government’s efforts towards rural prosperity and personal income tax reforms, which could stimulate vehicle demand. SIAM President Shailesh Chandra stated that 'The focus on long-term economic growth, coupled with personal tax relief, is likely to create demand for automobiles, especially in the two-wheeler and entry-level passenger vehicle segments.' He also highlighted the benefits of the Export Promotion Mission and incentives for integrating Indian manufacturers into global supply chains. However, SIAM has stressed the need for further incentives to accelerate EV adoption and to support the transition of the conventional auto industry towards cleaner powertrains.
Auto Component Sector To Benefit From MSME Support
The Automotive Component Manufacturers Association (ACMA) has welcomed the budget’s increased credit guarantee cover for Micro, Small, and Medium Enterprises (MSMEs) from INR 5 crore to INR 10 crore, calling it a much-needed boost for technology investments and global competitiveness. ACMA President Shradha Suri Marwah said, 'The focus on MSMEs, innovation, exports, and supply chain resilience will provide a strong impetus to the auto component industry.' The sector also stands to gain from duty exemptions on capital goods for EV battery manufacturing, helping localise production and reduce dependence on imports. However, with global competition in the auto component space intensifying, the industry remains watchful of how these policies translate into on-ground benefits.
Auto Retailers Expect Demand Growth With Tax Reforms
The Federation of Automobile Dealers Associations (FADA) has responded positively to the budget, particularly welcoming the increase in the income tax exemption limit to INR 12 lakh, which it believes will boost disposable income and drive sales of two-wheelers, passenger vehicles, and EVs. FADA President C S Vigneshwar stated, 'With more income in the hands of consumers, we expect a direct impact on vehicle upgrades and first-time buyers entering the market.' The association also lauded the Dhan Dhanya Krishi Yojana, which benefits 1.7 crore farmers, and the expansion of the Kisan Credit Card loan limit, which could stimulate demand for tractors and small commercial vehicles in rural areas. However, FADA remains concerned about high interest rates and financing challenges, which continue to affect vehicle affordability.
Tyre Industry Sees Growth In Infrastructure Spending
The Automotive Tyre Manufacturers’ Association (ATMA) has expressed optimism about the budget’s focus on infrastructure, road networks, and logistics expansion, which will directly impact tyre demand from both the OEM and replacement markets. ATMA Chairman Arnab Banerjee remarked, 'A well-developed road and logistics network is the backbone of the automotive sector, and these initiatives will drive sustained demand for tyres across commercial, passenger, and agricultural segments.' However, the industry still seeks greater protection from cheap imports and additional incentives for domestic raw material production.
Industry Expectations
Despite the positive aspects, several industry concerns remain unaddressed. While the budget focuses on long-term EV growth, there is no immediate relief for ICE vehicle buyers, and incentives for vehicle scrappage remain inadequate. The lack of additional consumer subsidies for EVs could slow adoption, particularly in price-sensitive segments. Additionally, while duty exemptions on EV components are helpful, incentives for local battery cell manufacturing remain below industry expectations.
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